In the big, legal field of “commercial collections” there is seldom good news. Even rarer, there is seldom a big benefit to help you get paid. Commercial collections for the construction industry, however, is different–there is some good news and there are some BIG, effective strategies to help you get paid . . . .
Introducing the Materialmen’s Lien (sometimes referred to as construction, subcontractor, contractor or mechanics lien) and/or the Payment Bond Claim!
What are the benefits to filing a Materialmen’s Lien in Georgia and/or making a claim against a Payment Bond? Although liens and payment bonds are completely separate animals with their own advantages and disadvantages, they share a BIG ADVANTAGE: for the subcontractor or the material supplier it is like getting a free GUARANTOR to promise to pay you the money you are owed after the money is owed! This is unthinkable in almost any other collection area. Look at this example:
OWNER hires ABC CONTRACTOR to build something; ABC CONTRACTOR, in turn, hires XYZ SUBCONTRACTOR to perform all of the electrical work on the project. Assuming that XYZ SUBCONTRACTOR fully performed under its contract, but ABC CONTRACTOR breaches its contract with XYZ SUBCONTRACTOR by failing to pay XYZ SUBCONTRACTOR, then, pursuant to standard contract theory (i.e., commercial collections), SYZ SUBCONTRACTOR may pursue collection of the debt from ABC CONTRACTOR (and only from ABC CONTRACTOR). But in the niche area of construction collection, in addition to seeking payment from the contractor, XYZ SUBCONTRACTOR may be able to file either a lien or make a payment bond claim in which case, XYZ SUBCONTRACTOR can look to either OWNER (in the case of a lien) and/or SURETY (in the case of a payment bond). Imagine someone owes you some money, and then after the debt becomes due, you find that a third-party may also be responsible for paying you.
Practical Tip: If you are a supplier or subcontractor who wants to improve your recovery of accounts receivables (AR), then, before you begin work or begin providing materials to the jobsite, try to obtain a personal guarantee from your customer’s owner. That way, if you are not paid, you may be able to seek recovery from (i) your customer such as ABC CONTRACTOR, (ii) your customer’s individual owner, (iii) by using a mechanics liens, the OWNER, and (iv) if there is a payment bond covering the project, then the SURETY. Four potential debtors/guarantors will significantly increase your likelihood of recovery.
Is It as Simple as It Seems? Unfortunately, nothing is entirely simple, but filing a claim of lien in Georgia and making payment bond claims are typically not too difficult nor too expensive. Of course, the lien claimant or the bond claimant must meet several obligations and deadlines in order to pursue their lien rights but most “good” subcontractors and suppliers do this automatically, and less “professional” subcontractors and suppliers, admittedly, seem to have more difficulties. We hope to address some of these issues in future blog posts as well.
What is the Difference Between a Claim of Lien and a Payment Bond Claim? On all privately-owned construction projects in Georgia, those who supply labor, services or materials have basic rights if they do not receive timely payment. On all public works projects (government-owned construction projects) of a certain size in Georgia, those who supply labor, services or materials have rights against the payment bonds. In addition, some private projects are also covered by Payment Bonds in which case, an unpaid subcontractor or supplier may file a construction lien and, concurrently, file a claim against the payment bond (which really increases the ability to recover your AR).
How Do I File a Construction Lien in Georgia? As mentioned briefly above, lien and bond claimants must meet various requirements in order to file a lien. Thus, it is vital to select a Georgia construction lawyer to help you analyze your specific matter and advise you on your collection options. It is important to know that lien and bond claims must be made within 90 days of the last day in which you worked or supplied materials on the project. (It could be a shorter period if you signed a statutorily authorized lien waiver).
It’s Up to You if you Want to Collect Your Money: If you are looking for a construction lawyer to help you file a materialmen’s lien (or make a claim against a payment bond) anywhere within the State of Georgia, please click here to contact us today.
After two years of hard work, we are pleased to announce that Construction Subcontracting: A Comprehensive Practical and Legal Guide has been published by the American Bar Association (“ABA”), and Mark Cobb is pleased to have been one of the contributors to this amazing new resource (and the only participating attorney from Georgia!)
Although this publication could be useful to many people including construction and credit professionals, it is a book written by subcontractor law attorneys primarily for other attorneys who need to know more about the subject. In some ways, it is intended to begin codifying and identifying those issues unique to specialty trade subcontractors and material suppliers as the new concept of SUBCONTRACTOR LAW becomes more and more recognized by legal professionals, educators, and construction industry professionals.
Construction Subcontracting: A Comprehensive Practical and Legal Guide was the brain-child of Division 9 of the ABA’s Forum on the Construction Industry. Founded in 1976, the Forum has grown to become the largest organization of construction lawyers in the world. It fulfills its mission of “Building the Best Construction Lawyers” and Forum members represent all segments of the industry, including owners, design professionals, contractors, construction managers, integrated design-builders, subcontractors, suppliers, insurers, and sureties. Division 9 is a sub-group of Forum member attorneys who represent and focus on the unique needs of specialty trade contractors and suppliers. The attorneys who are active in Division 9 recognized the lack of a national publication and guide in this burgeoning area of practice. This book remedies this in fulfilling its mission to be “comprehensive”, “practical” and “legal”. The three editors, each of whom are at the top of their profession, chose to divided the text into the following six parts:
- The Subcontract Document
- Subcontract Performance
- Insurance, Bonding, and Licensure
- Special Project Issues
- Other Contracting Arrangements
As you can imagine with a book of this caliber, each section is filled with multiple chapters dedicated to explaining the fundamentals of Subcontractor Law including contractual rights and obligations, Federal and state statutory provisions impacting subcontractors as well as common law issues and remedies affecting construction professionals.
Part One of the book discusses “The Subcontract Document” which includes an examination into subcontract terms commonly used in standard contract templates (such as AIA contracts, ConsensusDocs and others frequently used construction forms) as well as their advantages and disadvantages; this section tears apart the common subcontract terms including flow-down provisions, change orders, insurance, warranties, terminations, and lien waivers. In addition to these (and other) express contract provisions, the section also discusses implied subcontract terms such as covenant of good faith and fair dealing. This important section also addresses the formation of subcontracts from the bid process through final negotiations and includes topics such as Bid Shopping, Bid Padding, Promissory Estoppel Doctrine, Negotiation Strategies and Preparing Fall-Back Provisions.
Part Two discusses “Subcontract Performance” which looks at such diverse subjects as construction scheduling, excusable and non-excusable delays, acceleration and damages as well as tips regarding calculation of damages. This section of the book also includes chapters on payment issues, mechanics and construction liens, change orders and extras as well as issues related to differing site claims, asserting and proving the claims of subcontractors, as well as contract terminations. This lengthy section of the book concludes with the topics of Warranties in Construction Subcontracts (expressed and implied), an analysis of the Spearin Doctrine (i.e., the owner’s implied warranty), Indemnity and Federal Prevailing Wage Law and Project Labor Agreements including the Davis-Bacon Act, Contract Work Hours and Safety Standards Act, and The Copeland Anti-Kickback Act. (Stay tuned for a future blog post in which Mark will provide a detailed summary regarding his contributions to the chapter on Subcontractor payments.)
Part Three addresses the vital topic of “Insurance, Bonding, and Licensure” and includes a detailed analysis of the different types of insurance generally required of subcontractors including General Liability Insurance, Professional Liability Insurance, Builders Risk Insurance, Workers’ Compensation Insurance, Automobile Coverage as well as related issues such as waivers, endorsements and subrogation. This section also provides chapters on surety bond issues, Miller Act and “Little Miller Act”, payment bonds, performance bonds, and mechanics lien discharge bonds. Regarding subcontractor licensure, the book discusses the need for a licenses, the various governing boards and non-compliance with licensure requirements as well as the payment rights for unlicensed subcontractors.
Part Four attacks the difficult topic of “Disputes” including an analysis of typical subcontract provisions such as the Duty to Continue Work Pending a Dispute, Direct Discussion and Escalation; this part also looks at litigation pass-through claims discussing such vital topics as case management, discovery and joint defense agreements; in addition, it looks at alternate dispute resolution methods including mediation, arbitration and dispute avoidance.
Part Five’s “Special Project Issues” takes a look into several interesting and often-overlooked subjects including an analysis of Federal, State and Local Contracting (including discussion on competitive bidding, preference and incentive programs and bid protects); Alternative Project Delivery (such as design-build, Tri-Party Agreements, and Public-Private Partnerships); Green Building issues (including the LEEDS rating systems as well as others rating systems such as Earth Advantage, The Living Building Challenge, DGNB and others as well as the additional project risks associated with green building techniques); finally, this section addresses Globalization and International Projects whether led by foreign contractors working on projects in the United States or US contractors working abroad.
Section Six, the final section, addresses the cutting-edge topic of “Other Contracting Arrangements”, and it includes discussion on “newer” arrangements such as Subconsulting Design Contracts, Design Issues, Supply Contracts and Equipment Leases (including equipment rentals on construction projects), Teaming Arrangements such as joint-venture agreements along with their management, advantages and disadvantages including their role in the federal procurement context.
As you can see, this comprehensive publication is a long-overdue resource for those of us practicing in the field of subcontractor law. It is an amazing “first-step” as this new legal field is accepted and defined by the legal profession, legal educators and construction professionals. Mark Cobb was honoured and thrilled to have been a part of this seminal text in his field, and he greatly enjoyed the ability to work with some of the leading subcontractor law practitioners in the country.
If you are interested in more information regarding this subject or if you would like to obtain your own copy of Construction Subcontracting: A Comprehensive Practical and Legal Guide, then please contact us today. If you would like to purchase your own copy of this useful tool directly from the publisher, please click here > >
If you have provided labor, materials, equipment or other services on a construction project AND you have not received payment, then you may be entitled to file a lien under Georgia’s current lien laws. Determining who may file a lien and when a lien may be filed can be tricky, but filing the correct document and properly providing statutory notice can be even trickier!
The Sad Reality About Filing A Lien Yourself: Until you’ve dealt with Georgia’s lien statutes, many people think that “filing a lien is easy”. They think all that they need to do is fill-out a “lien form” and file it with the court. Unfortunately, that’s not true! There is no short-cut or no “one-size-fits-all” type of lien.
Because Georgia’s lien laws are strictly construed against the lien claimant, even one small mistake can invalidate a claim of lien; consequently, we highly recommend that you engage the services of a qualified Georgia construction attorney. In addition, because liens are clouds upon the title of the real estate against which they are filed, a lien claimant may be responsible for damages to the owner caused by an improper lien. Nonetheless, we believe that it is important that every construction professional has an understanding of the basic lien statutes. Thus, this article is intended to give you as thorough an understanding of Georgia’s mechanics and materialmen’s lien process as possible and will help you better understand your lien rights. Then, you’ll be more informed as to your legal rights and potential pitfalls as you seek an attorney to assist you.
WHO HAS A RIGHT TO FILE A CLAIM OF LIEN?
Not just anyone can file a lien for a past due invoice. Materialmen’s liens greatly improve a subcontractor’s or supplier’s odds of recovery, however, only certain parties providing certain services are entitled to file a lien for nonpayment. Generally speaking, prime contractors, specialty trade subcontractors, sub-subcontractors, and material suppliers who have provided services, labor or materials which have “improved” real estate are entitled to file a claim of lien. In addition, Georgia’s statutes allow architects, registered surveyors, engineers, and manufacturers of machines the right to file liens if they are not paid for their services. Others may also be allowed to file a lien in Georgia, and for more information on the specifics of O.C.G.A. Section 44-14-361, please click here > >
WERE YOU REQUIRED TO SEND A PRELIMINARY NOTICE?
Assuming that you are statutorily authorized to file a lien, you may (or may not!) have had a condition precedent in order to preserve your right to file a lien. If your contract is directly with the project owner, there is no requirement that a preliminary notice is required; if your contract is with the prime contractor, then a preliminary notice is not required. If your contract is with a subcontractor, then you are required to send a Notice to Owner/Notice to General Contractor within the first thirty (30) days that you begin working. These notices should be sent every time you contract with a subcontractor or supplier as they will PRESERVE your right to file a materialmen’s lien if necessary. Failure to timely send the preliminary notices may prevent you from having any lien rights (there are always exceptions, however, so please check with your attorney if you were unable to or failed to send a proper notice). For more information on Georgia’s statutory construction notice scheme, please click here > >
WHAT IS THE DEADLINE TO FILE A LIEN IN GEORGIA?
Even in you are entitled to file a Georgia construction lien, you must meet the deadline for filing a lien. Generally speaking, all liens in Georgia must be filed within 90 days of the last day in which work was actually performed on the jobsite (which is likely not the same day as the invoice date so don’t look at the invoice date in calculating the deadline!) If the potential lien claimant signed a Georgia statutory lien waiver form, then the time period in which a valid lien may be filed may be reduced to either (i) 90 days from the last day worked or (ii) 60 days from the date of the lien waiver–whichever is less!! Please remember that whoever prepares your Georgia lien will need some lead-time to perform the necessary research and prepare all of the proper documents and get it timely filed.
PREPARE YOUR GEORGIA MATERIALMEN’S LIEN:
Many lien claimants attempt to file their own liens as the online forms look “easy”; however, as you frequently find, you “get what you pay for”. The simple parts of the lien include proper identification of the lien claimant which may not be as obvious as you think (e.g., all liens should use a full, legal name such as “ABC SUBCONTRACTING, LLC”) and a description of the services or materials which were supplied. The more difficult aspects of the lien include proper identification of the owner of the real estate (Georgia’s county tax records frequently contain information only on former land owners!) and the legal description of the property to be liened. Generally, listing only a street address on a Georgia lien is not advisable. In fact, in most situations we recommend a limited title search to locate the correct property owner’s name, the metes-and-bounds legal description to the property, and to locate the vesting deed.
Also, Georgia’s lien laws require certain phrases on the lien; if these requirements are not met, then the lien will not be valid even if you do everything else right.
FILING LIENS IN GEORGIA:
We have 159 counties in our state, and your lien must be filed (before the deadline discussed above) in the county where the property to be liened is located. Liens are filed with the Clerk of the Superior Court in the county of the project’s location, and there will be a lien recording fee (which is fairly nominal–between $5 and $10 for the first page of the lien). In addition to filing the claim of lien, we typically suggest cross-referencing the lien to the real estate owner’s vesting document to help increase the odds that the lien will be “found” by those performing title searches.
SERVE NOTICE OF THE LIEN ON THE REAL PROPERTY OWNER:
Georgia’s lien laws require that the owner(s) of the liened real estate be given notice of the filing of the lien within 2 business days of the filing of the lien. We strongly recommend that notice of the filing of the materialmen’s lien be sent via certified mail (that way, you have proof of sending and proof of delivery).
ENFORCE YOUR MECHANIC’S LIEN:
Pursuant to Georgia law, your lien is valid for one year from the date of filing. This “year” gives many lien claimants the opportunity to settle or negotiate payment of their claims with limited attorney time or costs. If payment is not received within the year, however, then you must file a lawsuit against the person or entity with whom your contracted AND a Notice of Filing of Action must be filed within 30 days of the date your lawsuit is filed (and notice given to the owner of the liened property). If you prevail in your lawsuit, then your lien remains enforceable beyond the anniversary of the filing of the lien (this is frequently referred to as “perfecting your lien”). For more information on enforcing a Georgia lien, please click here > >
FORECLOSURE OF A GEORGIA MATERIALMEN’S LIEN:
After you prevail in a lawsuit against the entity which contracted with you for services, labor or material, then you can take the steps necessary to foreclose upon the lien. This gets very complicated, but unless you contract directly with the owner of the real estate, you will likely have to file a second lawsuit to institute foreclosure proceedings. Fortunately, Georgia liens are almost always resolved prior to institution of foreclosure proceedings, but if you find yourself with a valid lien without payment, then you have the option to foreclose the lien and force the sell of the real estate to pay your debt.
Georgia’s mechanics and materialmen’s liens laws are a very useful tool for enforcing payment for the work, materials or services provided by a contractor or a supplier; however, the rules governing the preparing and filing of liens are extremely tricky (we haven’t even discussed the exceptions in this overview!); if you have any questions regarding Georgia’s construction liens or subcontractor liens, please leave us a comment or contact us before your lien rights evaporate.
Construction projects are all about deadlines–30 days, 60 days, 90 days…..You’re always calculating when you will start or complete your work during a project.
And, have you ever finished a project and when payment is slow, you want to know the deadline before your ability to file a payment bond or materialmen’s lien expires? Affidavits of Nonpayment, for example, must be filed within 60 days from the date of your Georgia lien waiver, but your construction lien must be filed within 90 days of the last day you were on the job.
Well, there’s no need to keep counting out on your fingers or searching for the calendar you keep misplacing–Cobb Law Group has created a calendar wheel for this very thing, and as a small thank you, we will drop one in the mail to you for FREE!! It’s so easy, just
1. “Like” Cobb Law Group on Facebook;
2. Leave a comment on the blog with a topic you would like for us to write about in a future blog article or tell us how you found us; and
3. E-mail us your mailing address email@example.com
No more scrambling around or being lazy about those deadlines–we use ours all the time!
Giveaway ends when supplies run-out!
by Mark A. Cobb
On July 1, most of the 2013 Georgia legislative changes take effect including a very crucial amendment to Georgia’s lien laws.
Earlier, this year, our state legislature approved and our Governor signed in to law, an amendment to the Georgia Mechanics and Materialmen’s Lien Statutes which allows lien claimants the right to include all of their contract costs in their lien amount. Thus, as of today, it is clearer that the law allows lien claimants to include such amounts as pre-judgment interest, general condition costs, mobilization, de-mobilization, and profits in the amount they claim in the form of a lien. Specifically, Part 3 of Article 8 of Chapter 14 of Title 44 of the Official Code of Georgia Annotated, relating to liens of mechanics and materialmen, was amended by revising Code Section 44-14-361, relating to creation of liens and property to which lien attaches. The following is the revised O.C.G.A. Section 44-14-361 (the changes to the current statute are indicated underlined) which takes effect today:
(a) The following persons shall each have a special lien on the real estate, factories, railroads, or other property for which they furnish labor, services, or materials:
(1) All mechanics of every sort who have taken no personal security for work done and material furnished in building, repairing, or improving any real estate of their employers;
(2) All contractors, all subcontractors and all materialmen furnishing material to subcontractors, and all laborers furnishing labor to subcontractors, materialmen, and persons furnishing material for the improvement of real estate;
(3) All registered architects furnishing plans, drawings, designs, or other architectural services on or with respect to any real estate;
(4) All registered foresters performing or furnishing services on or with respect to any real estate;
(5) All registered land surveyors and registered professional engineers performing or furnishing services on or with respect to any real estate;
(6) All contractors, all subcontractors and materialmen furnishing material to subcontractors, and all laborers furnishing labor for subcontractors for building factories, furnishing material for factories, or furnishing machinery for factories;
(7) All machinists and manufacturers of machinery, including corporations engaged in such business, who may furnish or put up any mill or other machinery in any county or who may repair the same;
(8) All contractors to build railroads; and
(9) All suppliers furnishing rental tools, appliances, machinery, or equipment for the improvement of real estate.
(b) Each special lien specified in subsection (a) of this Code section may attach to the real estate of the owner for which the labor, services, or materials are furnished if they are
furnished at the instance of the owner, contractor, or some other person acting for the owner or contractor and shall include the value of work done and materials furnished in any easement or public right of way adjoining said real estate if the work done or materials furnished in the easement or public right of way is for the benefit of said real estate and is within the scope of the owner’s contract for improvements to said real estate.
(c) Each special lien specified in subsection (a) of this Code section shall include the amount due and owing the lien claimant under the terms of its express or implied contract, subcontract, or purchase order subject to subsection (e) of Code Section 44-14-361.1.
(d) Each special lien specified in subsection (a) of this Code section shall include interest on the principal amount due in accordance with Code Section 7-4-2 or 7-4-16.
In addition to this important update to Georgia’s lien laws, most of Georgia’s new statutes also take effect today including the amendment to Georgia’s constitution to allow the state to authorize new charter schools over the objection of local school boards, and a $2,000 increase in the amount of tax-free income married couples filing jointly may claim as an exemption.
by Mark A. Cobb
The Georgia Mechanics and Materialmen’s Lien Law Statutes (O.C.G.A. Section 44-14-360 et seq.) govern all aspects of filing construction liens in Georgia, and our construction lawyers have filed hundreds or thousands of liens on behalf of contractors, specialty subcontractors and material suppliers in virtually every county in Georgia!
Disclaimer: This blog post and its links (just like all of our blog posts) try to offer SOME of information regarding some of the most common questions which we get. Unfortunately, we cannot offer legal advice through a blog article, and you should not file a lien in Georgia based upon the information provided through our blog and website. Thus, we strongly encourage any potential lien claimant to seek competent legal advice from an experienced Georgia lien attorney in order protect your rights–we can provide you some useful guidelines in our blog articles, but we cannot cover all of the exceptions, loopholes, alternate solutions and pitfalls of filing construction liens in Georgia. When it comes to Georgia’s lien requirements and surety bond claims, there is simply no substitute for experience and Mark Cobb has over 20 years for experience! To learn more about Mark Cobb, please click here > >
Strict Compliance with every aspect of Georgia’s Lien Laws: Because materialmen’s liens essentially make a third party (such as the property owner) responsible for making sure that you get paid, Georgia courts have consistently required that lien claimants strictly comply with every aspect of the lien laws. To better understand Georgia’s strict compliance requirements, please click here > >
Preliminary Requirements for Filing a Lien in Georgia: Those in privity of contract with either the owner or the general contractor do not have any preliminary notice requirements in Georgia; however, if you are a third tier sub-subcontractor or material supplier then you probably need to send a Notice to Owner and a Notice to Contractor (sometimes called Notice of Furnishing, NTO, or NTC) within the first 30 days you began working on the project. To learn more about NTOs, please click here > >
Deadline for Filing a Lien in Georgia: All types of construction liens must be filed within 90 days of the last day in which they were physically on the job site (NOT invoice date!); if you signed a lien waiver, then your deadline to file a lien may be shortened to the 60th day from the date of the lien waiver. To read more about this, please click here > >
Georgia Lien Form: Although there is no magic bullet form for filing liens in Georgia, our legislature has mandated certain requirements which must be contained in the lien including some specific language and some particular font sizes. To see a copy of the Official Code of Georgia Section 44-14-361.1 with specific language requirements for liens, please click here > >
Costs & Jurisdiction for Filing a Lien in Georgia: Lien Claimants must file their Georgia liens in the county where the construction project was located. Liens are filed with the Clerk of the Superior Court and the filing fees are, currently, $5.00 for the first page and $2.00 for each additional page. To see a list of addresses, telephone numbers and websites for the clerk of court of each Georgia county, please click here > >
Statutory Notice of Filing of Lien: No later than 2 days after a claim of lien is filed with the clerk of court, lien claimant must send each owner of the real estate which you liened a copy of your lien.
Perfecting Your Lien: Unless the owner of the real estate where the lien is place files a proper Notice of Contest of Lien, a Georgia materialman’s lien will expire one year from date of the filing of the lien unless a law suit is filed against the entity with whom you contacted (if you are a subcontractor, this would likely be the general contractor; if you are a material supplier, then it might be either a subcontractor or the prime contractor. To read more about this, please click here > >
Georgia Notice of Filing of Action: Within 30 days of filing a law suit to perfect a construction lien, the lien claimant must also file a Notice of Filing of Action with the clerk of court in the county where the lien was filed. To read more about Notices of Filing of Action, please click here > >
Georgia Foreclosure of Lien Action: Sometimes, it is possible to combine the foreclosure of the lien action with the lawsuit a lien claimant filed within one year of the filing of the lien; however, jurisdictional or strategic differences may prevent this; if so, then after the “first” lawsuit is filed, and if the lien claimant prevails in that lawsuit, then Georgia’s lien laws require a second lawsuit to begin the foreclosure process (against the owner of the real estate). To read more about this process, please click here > >
Only Georgia Lawyers Can File Materialmen’s Liens in Georgia: As you can see from this very basic overview, filing a proper materialmen’s lien in Georgia is very technical and–from the first day you worked until the end of the lien foreclosure action–Georgia Claims of Liens must be in strict compliance with ALL of the requirements. Furthermore, its importanta for a potential lien claimants to understand that lien filing services are prohibited from filing construction liens in Georgia–only lawyers admitted to practice in Georgia are allowed to file materialmen’s liens in the lien records.
We hope that this overview on how to file a supplier lien or subcontractor lien on a Georgia job site has helped to provide you with useful and basic information regarding the lien process in Georgia. If you have worked on a Georgia construction project and you have not received payment, please contact an experienced Georgia construction attorney today. The lien and bond lawyers at the Cobb Law Group and help you, please telephone us at 1-866-960-9539 or email us today. We can help you prepare and file your lien anywhere in the State of Georgia!
by Mark A. Cobb
(UPDATED MAY 9, 2013) GOVERNOR SIGNED HB 434 INTO LAW; click here for more information!
We love sharing good news about pending changes to Georgia’s lien laws! A couple of weeks ago, we published a blog post about Georgia 2013 HB 434 which allows Georgia lien claimants to include both general condition costs and accrued interest as a part of their lien claims. At the time our blog entry was published, the Georgia House of Representatives had passed the amendment and the bill was being forwarded to the Senate. Our long-time friend, Senator Jack Murphy sponsored the bill in the Georgia Senate, and, we are pleased to report, the bill passed the Senate unanimously. Consequently, HB 434 has been forwarded to Governor Deal for consideration. Thank you Georgia representatives and senators!
This vital legislation greatly impacts Georgia’s subcontractors and material suppliers. In a recent court decision, a judge ruled that a lien claimant was not allowed to include the whole value of its contract in its lien; thus, for example, the lien claimant was potentially prohibited from included general condition costs, mobilization and demobilization costs, etc. The proposed legislation of Georgia HB 434 attempts to rectify this potentially detrimental court holding by specifically amending Georgia’s lien statute to permit a claim of lien to include the amount due and owing the lien claimant under the terms of an express or implied contract, subcontract, or purchase order as well as interest on the past due balance.
To read the proposed change to Georgia’s Mechanics and Materialmen’s Lien Act found at O.C.G.A. Section 44-14-361, please click here.
The construction attorneys at the Cobb Law Group want to keep you up-to-date on all the laws and cases which affect your rights. Please rely on us with any questions you may have regarding Georgia’s lien laws and payment bond claims. Contact us here.
by Mark A. Cobb
Admittedly, the Mechanics and Materialmen’s Lien Act gives Georgia’s contractors, subcontractors and material suppliers a giant step towards getting the money they are owed. And, a giant step is a wonderful gift, but there are other steps which must be undertaken if the lien claimant wishes to enforce its lien. As we’ve discussed before each and every aspect of Georgia’s Lien Law must be strictly construed. In other words, every materialmen’s lien claimant must satisfy every requirement of Georgia’s statutes in order to have a valid lien.
Assuming that a claimant holds a valid lien against the real estate where the work was performed or where the claimant’s materials were used, the lien claimant has a “good start” but he or she needs to continue to meet the additional requirements of Georgia’s lien laws in order to preserve, perfect and enforce its construction lien against the real property owner.
As with virtually every aspect of law, there are always exceptions, but generally, Georgia lien foreclosure laws require a lien claimant to complete two distinct steps before actually foreclosing against the lien.
STEP ONE: FILE A LAWSUIT AGAINST THE PARTY WHO OWES YOU MONEY. In most situations, a property owner has contracted with the general contractor for the construction of his project. The general contractor, in turn, hires specialty subcontractors and material suppliers to work on and supply products to the project. If one of the specialty subcontractors or materialmen are not paid for their work, they may be entitled to file a materialmen’s lien against the real estate where the project is located. In a situation such as this, the lien claimant is usually barred from immediately foreclosing his lien or making the project owner financially responsible for the debt; instead, he must fulfill his obligation and first seek recovery from the person or entity with whom he contracted (e.g., the specialty contractor would have to sue the general contractor before commencing a proceeding against his lien).
Thus, in order to “perfect” its materialmen’s lien, the Georgia lien claimant must file suit against the party with whom they contracted within one (1) year of the date that the lien claimant’s materialmen’s lien was filed.
In addition, within thirty (30) days of filing the lawsuit and pursuant to O.C.G.A. § 44-14-361.1, the lien claimant must file a Notice of Filing of Action for Claim on Mechanics and Materialmen’s Liens with the clerk of court in the county where the lien claimant’s lien was originally filed.
Upon completion of the proper filing of the lawsuit and the subsequent Notice of Action for Claim on Mechanics and Materialmen’s Liens, the lien claimant’s lien has been duly “perfected”. And, assuming that the lien claimant prevails in its lawsuit to recover damages from the defendant (in our example, the general contractor), then the Georgia lien claimant must complete a second step prior to foreclosing upon its materialmen’s lien.
STEP TWO: FILE A LAWSUIT AGAINST THE OWNER OF THE REAL ESTATE AGAINST WHICH THE CLAIM OF LIEN WAS FILED: Although there are exceptions (bankruptcy of the general contractor, for example, may alleviate the need to file the first lawsuit), the typical, second step to Georgia lien foreclosure is a lawsuit against the real property where your work or materials were utilized to request that the court place a “special lien” against the real estate. Assuming that the lien claimant prevails in this second lawsuit and a special lien is granted to the lien claimant, the lien claimant may take the steps necessary to foreclose the lien and, hopefully, recover the money it is owed.
As you can tell, there are many pitfalls and dangers to attempting to enforce liens and foreclose real estate on your own. Failure to strictly comply with Georgia’s lien requirements will invalidate a lien, thus it is highly advisable to engage a qualified construction lawyer with experience filing and enforcing liens. If your business is an official business entity (for example, a corporation, limited liability company, etc.) then you are required to engage a Georgia attorney as Georgia courts have held that an official business entity cannot “represent themselves” as can individuals. Furthermore, making the proper claims, meeting the various statute of limitations and understanding civil procedure as your cases proceed, and presenting damages really need an experienced construction lien lawyer to perfect and enforce your materialmen lien rights.
If you have any questions regarding filing lien, perfecting liens, enforcing liens or other Georgia construction law questions, please feel free to call us at (770) 886-5890 ext. 1 or email us today!
by Mark A. Cobb
Since our law firm has a significant core practice area in which we file and perfect mechanics & materialmen’s liens and payment bond claims throughout Georgia, we address prospective clients’ lien questions almost everyday. We are surprised how many contractors and suppliers’ knowledge of Georgia’s construction lien requirements is based upon obsolete lien laws. In 2009, the Georgia legislature approved several significant changes to the Georgia’s Mechanics and Materialmen’s Lien Act. Since we continue to get so many questions regarding these changes, we thought a brief review of the changes made to Georgia’s lien laws in 2009 would be useful to many potential Georgia lien claimants:
SOME OF THE SIGNIFICANT 2009 GEORGIA LIEN LAW CHANGES:
- Date Georgia’s 2009 Lien Law Revisions Went Into Effect: March 31, 2009;
- Notice to Contractor/Notice to Owner: These notices to contractors (sometimes called Notices of Furnishing) must be sent to the owner and the contractor by registered mail, certified mail or statutory overnight delivery at the addresses specified in the Notice of Commencement (the former statutes did not specify the method these notices were to be given);
- Deadline for Filing a Claim of Lien: A Claim of Lien must be filed within 90 days after the lien claimant actually worked on the project or supplied materials to the project (the former requirement was more ambiguous requiring that a claim of lien be filed within three months from the last day worked); it is very important to note that Georgia’s new lien waiver forms may, for all practical purposes, shorten this deadline to sixty days from the date the lien waiver was signed;
- Deadline for Sending a Copy of the Lien to Owner & Contractor: A lien claimant is required to send a copy of the lien to the owner (and, if a Notice of Commencement was filed, to the general contractor) within two business days after the claim of lien is filed (the former lien requirement was ambiguous as to the deadline for sending a copy of the lien to the owner);
- Deadline for Perfecting or Enforcing a Claim of Lien: A lien claimant must file a legal action against the party with whom the lien claimant contracted within 365 days of the date the lien was filed (the former requirement was more ambiguous requiring that a legal action be filed within one year of the last day worked by the lien claimant); it is important to note that this deadline may be expedited if the property owner or the general contractor files a Notice of Contest of Lien (see below);
- What is a Legal Action (for purposes of lien enforcement): Georgia’s lien statute specifies that the lien claimant’s obligation to file a “legal action” may include filing a lawsuit, filing a proof of claim in a bankruptcy proceeding, or filing a demand for arbitration action (the former statute did not include arbitration as a legal action which would perfect the lien);
- Deadline for Filing a Notice of Action: The lien claimant must record its Notice of Filing of Action For Claim on Mechanics and Materialmen’s Liens within 30 days from the date it began a legal action to enforce its lien rights (the former statutes required that this notice be filed within 14 days);
- Notice of Lien Discharge Bond: If an owner, contractor or other interested party files a bond to discharge a materialmen’s lien, then, within seven days of filing a bond to discharge a lien, the party filing the bond must give the lien claimant notice of the filing of the bond (the former lien provisions did not require that notice be given to the lien claimant);
- Notice of Contest of Lien: This is an entirely new section which allows property owners and contractors the ability to accelerate the lien claimant’s deadline to file a legal action to enforce its lien claim; it is important to note that a properly filed lien contest will shorten the lien claimant’s deadline to file a legal action to enforce its lien to 60 days from its receipt of the notice;
- New Georgia Lien Waiver and Lien Release Forms: The revisions introduced new interim lien waiver forms and new final lien waiver forms as the only acceptable lien waiver forms to be used in Georgia; some of the material changes to the new forms include (i) specific language requirements; (ii) requirements that capital letters and a 12-point be used, (iii) the new forms release bond rights as well as lien rights, and, perhaps most importantly, (iv) sixty days after the lien waivers are signed, conditional lien waivers become unconditional lien waivers;
- New Affidavit of Nonpayment Form: Similarly, the statutory form for the Affidavit of Nonpayment has been changed and the older form should not be used any longer; changes to this form include (i) required formatting to include capital letters and font size, (ii) specific language required, (iii) the deadline for filing an Affidavit of Nonpayment has been extended from 30 days to within 60 days, and (iv) if an Affidavit of Nonpayment is filed, then within seven days of filing, a copy of the Notice of Nonpayment must be sent to the property owner (and if a Notice of Commencement had been filed then notice must also be sent to the general contractor);
- New Claim of Lien Form: The Georgia Claim of Lien form was revised to include (i) statutory required language, (ii) specific language printed in 12 point bold font, and (iii) clarification that the date when the claim became due is that last day in which a contractor or subcontractor actually worked on the real estate or a material supplier provided materials for use on the project.
Please keep in mind that this article is a brief summary of the significant changes to the lien laws made by the Georgia legislature; there are additional changes which have not been covered in this article; similarly, this article does not include matters which did not change (but with which lien claimants must strictly comply); thus, if you have a potential construction lien claim or if you are an owner or a general contractor trying to address a claim lien against your project, then you should contact an experienced Georgia construction law attorney who can help you understand, evaluate and file the claim of lien. Contact the Cobb Law Group to help you with your lien claim today!
We invite you to leave a comment below and tell us how the 2009 changes in the Georgia Lien Laws have affected you or your business.
Assuming you have a valid Georgia mechanic or materialmen’s lien, the lien is good for one year from the date the lien is filed. In order to extend the lien beyond this expiration date, however, Georgia’s lien laws require that the Lien Claimant file a lawsuit against the party with whom they contracted before the lien expires. In addition, the lien claimant must file (and serve) a Notice of Filing of Action for Claim on Mechanics and Materialmen’s Liens. Fulfilling all of the statutory requirements before the statute of limitations expires is referred to as “perfecting your lien”.
Due to the complexity of complying with Georgia’s Lien Laws and the inherent difficulties of self-representation, it is very important to have an attorney prepare this suit and meet the other statutory requirements on your behalf.
We occasionally get telephone calls, however, from subcontractors or laborers who filed their own liens and call us to help them perfect their liens; unfortunately, there are situations where the costs to enforce your lien rights may not justify the legal expenses. In those instances, Georgia offers a possible avenue for these smaller claims–Magistrate Court.
Georgia Magistrate Court is our state’s version of small claims court or the people’s court. Although the Magistrate Court is usually more dignified than the shows on television, it really is a forum for citizens of Georgia who are owed money but aren’t owned enough money to justify the expense and the time of hiring legal counsel. Thus, you may be able to file and prosecute an action in Magistrate Court pro se (that is, representing yourself). Magistrate Court currently has a jurisdictional limit of $15,000 which means you can only file your lawsuit in Magistrate Court if the amount you are owed is less than $15,000; consequently, the Cobb Law Group does not do much work in Magistrate Court, but you can find out more information by clicking here:
If you choose to pursue your claim in Magistrate Court, you are still required to file your Notice of Filing of Action for Claim on Mechanics and Materialmen’s Liens, and we strongly suggest that you hire a Georgia Construction law firm to prepare this document on your behalf as it must meet statutory requirements and will require information relating to the current owner’s of the real estate which may be difficult to locate.
If you have any experience which you wish to share regarding your experience with perfecting liens or filing a lawsuit in one of Georgia’s Magistrate Courts, please leave a comment below.
This is a general information article and should not be construed as legal advice or a legal opinion. The content above has been edited for conciseness and additional relevant points are omitted for space constraints. Readers are encouraged to seek counsel from a construction lawyer for advice on a particular circumstance.